Overview and Update On DoD Pharmacy

1

• Overview and Update On DoD Pharmacy

2
Overview

• Scope of the Benefit
• Usage and Trends
• Technology
• DoD Pharmacy Therapeutics Committee
• Uniform Formulary
• Accomplishments
• Objectives / The Way Ahead

3
DoD Pharmacy Program Objectives

• Uniformly, consistently, and equitably provide
  cost-effective drug therapy to meet patients
  clinical needs
• Provide a World-Class Pharmacy Benefit with a
  seamless interface between all three points of
  service
• Incorporate best commercial practice to the DoD
  pharmacy benefit management when possible

4
Structure of theDoD Pharmacy Program

• Oversight
• TMA Pharmaceutical Operations Directorate
• Oversight for all aspects of the pharmacy benefit
  as well as other pharmacy-related issues
• As of 1 Oct 07 DoD Pharmacoeconomic Center is
  part of the Pharmaceutical Operations Directorate
• Supports DoD PT Committee
• DoD Pharmacy and Therapeutics Committee
• Responsibilities include development of the
  Uniform Formulary, prior authorizations, and
  quantity limits
• Express Scripts, Inc.
• Contractor responsible for TRRx and TMOP

5
Scope of DoD Pharmacy Benefit

• 9.2M Beneficiaries
• 6.7M users of pharmacy benefit
• 115M prescriptions dispensed in FY06
• Three points of service
• 536 dispensing pharmacies across 3 military
  services in 121 MTFs
• 1 nation-wide TRICARE Mail Order Pharmacy (TMOP)
• 58,650 retail pharmacies (TRRx) managed by one PBM

6
TRICARE Eligible BeneficiariesMonthly Average,
FY07
Other lt1
Active Duty
Retirees Family Members 65
1.8M
1.8M
20
19
2.3M
3.3M
25
Retirees Family Members lt 65
36
Active Duty Family Members
Source M2
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Current DoD Pharmacy Environment
Mail
Retail 55,000 Locations
Military Hospitals 101 CHCS Hosts 700 Dispensing
Sites
Electronic
Paper
Paper
PDTS
Civilian Network Provider
Military Provider
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Military Treatment Facility (MTF) Pharmacy

• 536 Dispensing Pharmacies in 121 MTFs
• Beneficiaries have access to prescriptions
  without co-pay
• Formulary composed of Basic Core Formulary plus
  MTF additions from the Uniform Formulary
• Least costly option to patient no co-pays
• Least costly point of service for DoD
• 43 of Rx workload performed at MTF
• 25 of dollars spent

Does not include inpatient costs
9
TRICARE Mail Order Pharmacy

• TMOP five year contract awarded to Express
  Scripts Inc. - Sep 02
• Services provided via state-of-the-art facility
  in Tempe, AZ starting 1 Mar 03
• Product replenishment through Prime Vendor
  (McKesson) using Federal Pricing
• Largest commercial mail order account in industry
• 7 of Rx workload performed at TMOP
• 12 of dollars spent

10
TRICARE Retail Pharmacy

• Consolidated retail pharmacy services under a
  single contract to optimize benefit management
• Consistent benefit across all regions
• Portability in 50 states, Guam, Puerto Rico, USVI
• Pharmacy Help Desk Services 24 x 7 x 365
• TRRx dedicated staff
• 58,650 retail pharmacies now participate
• 50 Rx workload performed at TRRx
• 63 of total dollars spent

11
DoD Drug Expendituresthrough Fiscal Year 2007
Millions
Expenditures MTF 23 Retail 64 Mail 13
TRICARE Senior Pharmacy Program implemented
BRAC Pharmacy Benefit implemented
.
Does not include inpatient MTF expenditures
12
Brand Name Drug Acquisition Cost Indexed to AWP
Industry Price Reference
Source CBO
13
Pharmaceutical Costs For Eligible Beneficiaries,
By Age and POS, FY07
Source M2 PDTS Data
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TRICARE Pharmacy BenefitKey Points

• Multiple points of service
• Three tier co-payment structure
• Several features differ from the typical civilian
  health plan
• Some drugs are excluded from the benefit, but
  there is no fourth tier of drugs that are not
  available to beneficiaries because of
  cost-effectiveness considerations. Non-formulary
  drugs remain available to beneficiaries.
• No benefit year new drugs are added to the
  TRICARE benefit, designated formulary under the
  UF, the day they are marketed after FDA approval
• Implementation of non-formulary drugs occurs
  throughout the year
• OTC drugs may be available at MTFs

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Factors Influencing Expenditures

• Limited discounts at retail point-of-service
• Impact of federal pricing?
• Increased utilization by our beneficiaries
• No change in pharmacy copays since inception of
  TRICARE Senior Pharmacy Program in 2001
• Co-pays at retail remain frozen
• Maximum non-formulary co-pays stipulated in law
• Limited leverage to optimize drug utilization
  management in the network point of service
  compared to MTFs

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• Usage and Cost Trends

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Defense Health Budget

• Defense Health Budget
• 2001 --- 18 Billion
• 2006 --- 38 Billion
• (8 of DoD budget today)
• 2015 --- 64 Billion (estimate)
• (12 of DoD budget)
• Retirees Health Care Costs
• 2007 --- 58 DoD Health Care Dollars
• 2016 --- 66 DoD Health Care Dollars

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Unique User Trends
Source PDTS
19
30-day Equivalent RxsBy POS, FY01 - 07
22
MTF
20
18
16
14
4th Quarter FY07 MTF 46Retail 38 Mail
Order 16
Retail
Apr 2001 MTF 76Retail 14 Mail Order 10
12
30d EQ Rxs (Millions)
10
TSRx Apr 01
8
Mail Order
6
4
2
0
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
FY01
FY02
FY03
FY04
FY05
FY06
FY07
Source USPD, PDTS
20
Percent Increase In Expenditures Over Previous
Fiscal Year
21

• Impact of Technology

22
DoD Pharmacy Vision
Military Hospitals
Retail
Mail
RxCOTS/ ePrescribing
Intermediary
Intermediary
TOL
Patients
Military Provider
Civilian Network Provider
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Influence of Technology

• Standardization of business processes across the
  enterprise
• Adoption and incorporation of industry best
  practices, standards
• Enhanced data aggregation, mining, sharing
• Enhanced communications
• Scalable systems
• Interoperability of disparate systems

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ePharmacy Initiative

• Electronic prescribing from all points of order
  entry (Civilian Network and Military providers)
  to all points of dispensing (military treatment
  facility, mail order, and retail)
• Develop an ePharmacy portal for patients
  (influence Point of Service decisions)
• Still in conceptual stage

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Pharmacy Commercial Off the Shelf (RxCOTS)

• Commercial Product (KLAS winner 2004, 05, 06)
• Acquired GE Centricity October 2004
• Will be integrated with AHLTA DoDs Electronic
  Health Record
• Enterprise order portability
• Refills anywhere
• Standard drug information across Enterprise
• Uniform policy implementation at an Enterprise
  and Local Level
• Immediate tracking of inventory and dispensing
• Accurate dispensing prices for
• 3rd party billing
• Audits (e.g., MERCF)

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• DoD PT
• Uniform Formulary

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DoD PT Committee ActivitiesThe Basics

• Conduct therapeutic drug class reviews
• Uniform Formulary
• Basic and Extended Core Formulary
• Review newly approved drugs
• Manage the pharmacy benefit
• Prior authorizations
• Quantity limits
• Monitor MHS pharmacy utilization and cost data
• Review other issues related to pharmacy
• Patient safety issues
• Incentive agreements
• Pending legislation

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Uniform FormularyPart of the Pharmacy Benefits
Program

• DoDs Pharmacy Benefits Program is
• Clinically effective
• Fiscally efficient
• Equitable to beneficiaries
• Integrated across the MHS
• and includes a Uniform Formulary of
  pharmaceutical agents based upon relative
  clinical and cost effectiveness.

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Uniform FormularyLegal Authority

• The process to be used in establishing the
  Uniform Formulary is mandated in law, and
  implemented in regulation and policy.
• Title 10 U.S. Code, Section 1074g
• 32 Code of Federal Regulations, Part 199.21
• TRICARE Policy Manual, Chapter 8, Section 9.1

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Uniform Formulary Decision Process

• PT Committee drug class reviews and
  recommendations
• Determines relative clinical effectiveness
• Determines relative cost effectiveness
• Recommends agent(s) for non-formulary status, as
  appropriate
• Recommends implementation period
• Establishes medical necessity criteria, if needed

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Uniform Formulary Decision Process

• Beneficiary Advisory Panel beneficiary comment
• BAP, a committee subject to FACA, meets 4-6 weeks
  after PT Cmte meeting
• Offers beneficiary perspective on proposed UF
  changes
• Director, TMA final decision
• Considers both PT Committee recommendations and
  BAP input
• Makes final decisions on UF

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Uniform Formulary Implementation Process

• Notification of MTFs
• On decision date, PEC notifies MTFs of UF, and
  provides criteria for establishing medical
  necessity
• Notification of Express Scripts, Inc. (ESI)
• 30 days prior to implementation date, PEC
  notifies ESI, the TRRx and TMOP contractor, and
  provides medical necessity criteria forms

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Uniform Formulary Implementation Process

• Communications Plan
• Push-out documents to all MTFs and pharmacy
  consultants (PEC)
• TRICARE news release (CCS)
• TRICARE Formulary Search Tool updates (PEC)
• Regional MCSC provider and Prime newsletter
  notices (CCS)
• Letter sent to patients identified as being
  prescribed medications moved to 3rd tier

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UF Cost Avoidance by Drug Class
35
NF/3rd Tier By POS30d Rxs
-26
Source PDTS
36
3rd Tier Cost Per Day by POS
-14
Source PDTS
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UF VARR Dollars

• Represents rebate dollars returned to the DoD
  from drug manufacturers
• UF VARR dollars represent a refund of dollars
  already spent
• UF VARR are based on Rxs purchased at retail for
  UF class products
• Implementation of federal pricing at retail may
  supplant the UF VARR program in the future.

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Uniform Formulary VARR Estimates FY07 FY08
Rebate estimates based on drug Classes reviewed
through May 07 With each additional UF VARR class
reviewed, the rebate s increase
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Accomplishments New Programs

• Direct to patient mailings
• patients impacted by 3rd tier
• Contract to provide formulary electronically
• Continued increase in use of mail order
• Uniform formulary/UF VARR savings
• Member Choice Center
• Sharing of pharmacy data with MCSCs

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Member Choice Center (MCC)(Started Aug 29, 2007)

• Contact Center and Enhanced Web Tools
• Dedicated toll free line (0800 1700 CST
  Weekdays)
• Retail Maintenance Medication Conversion
  Assistance
• Factual, objective information to facilitate
  informed decision
• Extensive, multi-faceted awareness campaign

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MCC Overview Process Flow
Beneficiary Education on MCC
Dummy data...
Dummy data...
Calls MCC
Visits Website
Physician Contacted
New Prescription for 90-Day Supply Sent to TMOP
TMOP Fills Prescription
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Operations Member Choice Center (MCC)Cumulative
Converted Scripts (Aggregate Total by Week)
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• Challenges /
• The Way Ahead

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DoD Pharmacy 2008 Program Objectives / The Way
Ahead

• Focus on preserving the benefit
• TMOP is the preferred point of service
• Co-pays are structured to encourage patients to
  make the most efficient choice
• Expand Utilization Management efforts and data
  mining
• MTF to mail
• Implementation of federal pricing
• TPharm consolidated contract award
• E-prescibing baby step

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• Questions?

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